Canadian M&A deals seen rebounding after sluggish first quarter

John Tilak

3 Min Read

TORONTO, April 5 (Reuters) - Mergers and acquisitions among Canadian companies are expected to pick up pace after a sluggish first quarter, driven by non-resource deals and a rebound in outbound transactions as pension funds and private equity firms put massive pools of capital to work, according to M&A advisers.

Though uncertainty around the renewal of the North American Free Trade Agreement (NAFTA) has weighed on deal activity in some sectors of Canada’s economy, bankers expect a resolution to lift deal volumes.

Meanwhile, changes to the U.S. tax system under President Donald Trump are seen boosting cross-border activity, they added.

Canadian M&A activity in the first quarter of the year dropped to $54.2 billion, down 37 percent compared with a year ago, data from Thomson Reuters showed on Thursday, weighed down by lower energy deals which were the biggest driver of 2017 activity.

Toronto-Dominion Bank, Lazard and Citigroup took the top three spots in the M&A volume rankings for the first quarter, followed by Goldman Sachs, JPMorgan and Bank of America.

Bankers expect real estate and industrials to be in focus this year.

“There’s a prodigious appetite from pension funds and alternative asset managers for high-quality global and Canadian assets,” said Brian Hanson, chief executive of Lazard’s Canadian investment banking division.

Despite rich valuations, Hanson expects pension funds to pursue new investments, adding: “They’re going to be very disciplined with respect to quality and valuation.”

The biggest deal in the first quarter was the Blackstone Group-led planned $17 billion acquisition of about 55 percent in Thomson Reuters Corp’s Financial and Risk business.

Blackstone also agreed to buy Pure Industrial REIT for about $2 billion.